Groundbreaking research into incurable diseases could be jeopardised if permission to create human embryos from animal eggs is withheld, scientists warned yesterday.

British researchers want to use the embryos to make stem cells with genetic faults linked to conditions such as Parkinson's disease, Alzheimer's and motor neurone disease. Studying how the cells grow could yield unprecedented insights into disease, leading to cures for the otherwise untreatable conditions.

The scientists fear the government and its embryo research watchdog, the Human Fertilisation and Embryology Authority, will outlaw the research to head off a public backlash. Some groups oppose the work because while the embryos would be almost entirely human, around 1% of their DNA would be from the animal.

Two scientific teams applied to the HFEA for licences to pursue the research last year, but a white paper published in December proposed outlawing "hybrid" embryos. The HFEA is due to announce its decision next week, but has indicated it will turn the licence applications down.

Scientists believe that by making stem cells with specific genetic faults, they will be able to unravel what goes wrong at the earliest stages of diseases. Their work has been hampered by the scarcity of human eggs and the low success rate of the technique. But by using animal eggs instead, they hope to make more rapid progress.

Stephen Minger, director of the Stem Cell Biology Laboratory at King's College London, said public consultation on the white paper had led to a "short-sighted, kneejerk reaction". Ian Wilmut, the Edinburgh scientist whose team created Dolly the sheep, said scientists would be at a "very clear" disadvantage if they were prohibited from pursuing the research.

Evan Harris MP, Liberal Democrat member of the science and technology select committee, said: "This is exactly the sort of groundbreaking and world-leading research that must be permitted to take place in this country. It is disappointing that the government, for no good reason, is proposing to ban this."

A Department of Health spokesman said the white paper proposals would be put to parliament for debate, adding: "In the meantime, the HFEA will make its decision on any outstanding applications."